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What happens when a time to pay arrangement fails?

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What happens when a time to pay arrangement fails?

Reviewed: 14th July 2017

Time to pay arrangements (TTPs) are generally offered to companies HMRC believe to be in temporary financial difficulty, and unable rather than unwilling to pay their tax liabilities. A TTP arrangement is effectively an instalment plan to repay arrears of business tax and National Insurance, and usually lasts between three and six months.

If you have successfully negotiated this type of arrangement, it will provide a vital breathing space for your business to recover, and removes some of the stress of being in debt with HMRC.

Although they take debt recovery measures quickly in many cases, HMRC do understand that unexpected cash flow issues arise during the general course of business, and this is their way of offering a lifeline to businesses in this situation.

What happens if something goes wrong with a TTP?

If a time to pay arrangement fails, HMRC will take enforcement action to quickly recover their debt. This could involve petitioning for your company’s winding-up, so that business assets are sold to repay creditors.

It is unlikely that you will be offered a second chance to repay over time, and if you cannot pay your arrears in full when they are demanded by HMRC, your company is at high risk of liquidation.

What TTP conditions will you need to meet?

Time to pay arrangements are offered on the understanding that your company meets all of HMRC’s conditions:

  • Monthly payments are made in full and on time
  • Any future beneficial changes in the company’s financial situation are disclosed so that monthly instalments can be increased, or the debt repaid in full if appropriate
  • Any tax refunds owed to your company are used to reduce the existing arrears
  • You fully comply with HMRC requirements with regard to filing and submissions, and do not fall behind with payment of current tax and NI liabilities
  • All debts to HMRC are disclosed on your TTP application
  • You are completely honest about the fact that your company requires more time to pay, and the overall time needed

The problem can be balancing HMRC’s requirement to minimise the length of time offered, and your need to offer an amount that is affordable for the whole term. As we mentioned earlier, the usual duration of a time to pay arrangement is under six months, but HMRC may be willing to consider a longer term under certain circumstances.

What is the result of a failed time to pay arrangement?

If you fail to meet the conditions of your TTP, your company could face financial penalties. Alternatively, HMRC may decide to take enforcement action by seizing business goods to the value of the debt.

The worst case scenario would be if they demand the debt is repaid immediately in full, and your business cannot afford it. In this case HMRC are likely to seek a winding-up order which would close down your company - if this happens, there is very limited time to act.

Professional guidance is crucial at this point. You may be able to gain access to an alternative source of finance, and pay HMRC in full. Real Business Rescue can assist in your dealings with HMRC, and provide the necessary advice at any stage.

Do not leave it until it is too late - we have vast experience of successfully negotiating time to pay arrangements, and can step in if you think the business cannot afford to meet its obligations under TTP.  

Call one of our team of experts for a free initial consultation – We have an extensive network of 55 offices offering confidential director support across the UK.

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